I bought several mutual fundson or about april 2012 and all but one appear to be temporary laggards: GRT Value, Oakmark Global, Osterweis Strategic Investment, Marathon Value, Tocqueville Select. Doubleline Funds trust, a bond fund is up YTD approx 4.5%, all the rest are down since April about 8 plus percent. Looking at the Sunday paper there are a lot of winners: Fairholme 24.1%, American sm cap world 11.3%, CGM Realty 12.8%, Fidelity Contra 11.1%, Fidelity grow co 13.4%, Fidelity RealInv 16.5%, T. Rowe Price Bl Cp GR 12.2%, T Rowe Price Real 16.7%, Vanguard gthIdx 10.6%, Wasatch Intl gth 13.7% Wasatch MicCp Val 12.0, Wasatch wld, 11.2. There are others and these are of the 300 biggest funds.
Anyone out there have the smallest cap funds that are beating the pants offa the biggies? What's wrong with my 'approach?' The funds I bought are not up to the best producers out there right now. Why is that? signed 'impatient and delirious.'
Comments
***Best thing is to have a plan, then stick to it. That doesn't mean holding onto funds that turn out to be losers forever. But stick to your strategy, in light of your risk tolerance. And then, needless to say, there are the surprises: like losing a job, divorce, whatever. Then ya just gotta re-evaluate....I see that you own 7 or 8 funds. Some may tell you that you're too concentrated. For me, that would be the limit of what I'd want to be worried about keeping track of.
Stick with no-load funds, and try to buy funds with lower relative Expense Ratios. In my case, what I've done is to pull together a small bunch of non-core funds which will hopefully even-out each other's volatility. That's another thing. Try to avoid volatility.
The EU thing these days is scaring the Markets. It's artificially screwing everything up. Stocks (and bonds?) are not trading on fundamental values lately, they're trading on the latest headlines. I wish it would stop. But this is what makes a Market: if I happen to own stuff that will benefit from a slide in value somewhere else, it's difficult not to enjoy it.
Don't go "chasing performance." If you buy into a hot, rising fund near a top, be prepared to wait a while for it to come back up again, after the inevitable drop. None of these funds have performance histories that run in a straight line.
Well, I hope this doesn't sound condescending. And I hope it's not "old news." Just in case you might find it useful, here's what I own, though not in the proportions to each other that I'd prefer. I got a couple of bets in this list that are way too big, as compared to the size of my other positions. But I certainly am satisfied with my choices:
MAPOX
MSCFX
MAPIX
MAINX
MACSX
PREMX
...OK, then. "Break a leg."
But to play along if you are sincere, Max hit the nail on the head... You need a plan.
For example, let's say you pick Fairholme because you like that Berkowitz "ignores the crowd." What happens if the "crowd" is actually right, for example in 2011 when Berkowitz lost a fair amount of money while the overall market had some gains? Are you going to be able to accept that sometimes Berkowitz will be off on his timing, or just plain wrong? If so, then follow your plan and don't be concerned with short term, YTD performance. Fairholme investors have suffered with several years of underperformance before this year's payoff. (Actually, most of them bailed.)
If you can't accept that Berkowitz will sometimes be wrong, then you need to either dump Fairholme from your plan, or you need another fund whose purpose will be balance out Fairholme. For example, maybe a large cap growth fund, because sometimes growth outperforms when value funds underperform. Or maybe you need just a plain vanilla index fund, which by definition can never really be "wrong".
Work out a plan and then you can evaluate funds based on whether they are actually working within your plan, rather than just whether they are doing better than other funds.
From your posting, it appears that your investment frustration level is high, and perhaps even rising higher.
It seems as if you anticipated huge rewards almost immediately. Sometimes that does happen;; often it does not. But don’t allow your current disappointments to cloud your judgment and nudge you into making imprudent decisions. When investing, time is your ally. Trees do not grow to the sky. Remember that a fundamental statistical mechanism that operates in the long=term for almost all endeavors is a regression-to-the-mean.
So patience and persistence is a mandatory requisite for successful investing.
Several MFO members have already offered you some excellent and wise advice. But you need not trust either me or them. It might assuage your anxiety and uneasiness if that advice was proffered by a seasoned and highly successful money manager.
That professional general advice is readily accessible on the Internet. Jeremy Grantham is a remarkably successful and renown financial sage. In February of this year, he summarized 10 investment lessons for Jonathan Burton, a MarketWatch reporter. These were referenced by MFO participants in earlier submittals.
Grantham’s 10 lessons are rules to guide your investment decision-making and actions. They are solid stuff, come from a recognized authority, and demand attention. In late February, Barry Ritholtz, of Big Picture fame published a succinct, shortened version that I copied for retention. Here is the Link to these rules that should enhance your likelihood of achieving investment success:
http://www.ritholtz.com/blog/2012/02/jeremy-grantham-10-lessons/print/
Please examine the lessons carefully.
Based on your posting, I feel that you have violated a few of them. By itself, that does not mean that you are doomed to fail. There are many pathways to investment wealth. The Holy Grail escapes all of us. But an honest assessment of your goals, your investment philosophy, your preferences, and your risk aversion (pain threshold) must be considered when contrasted against the Grantham standard. That critical comparison might give you some pause to entertain a realignment of your investment policy and strategy. Perhaps not, but that’s okay too.
I hope this reference is helpful. I wish you well.
Best Regards.
Impatient and Delirious
The 403b is gone, it's now in a Rollover IRA. To reduce tax burden, I have no Roth. I went with Traditional IRA, all the way. In the lowest tax bracket, there's no advantage to paying Uncle Sam NOW rather than later. (Trad. = tax deferred. Roth= pay now, but free-and-clear later, when you claim the money.)
In broad terms, I did a lotta homework, listened to the tv talking heads and read the guys who write on money. Barry Ritholtz is good, and Danielle Park, in Toronto. But along the way, you need to pick-up on the buzzwords and twist-phrases. These tv guests and hosts, and the writers mostly SEPARATE money from anything having to do with ethics. Money can be used for good purposes or it can be a tool to screw others. We're in a dirty game. The very nature of the Market is one-upmanship. Digest that fact, and move on, or else you'll just have to look on from the sidelines...
I became aware of the various niches which together, comprise the Market. I have maintained the KISS Principle. I never went into an investment too complex for me to understand how it worked. Using the information at hand, I created my own Big Picture of what's going on in the Macro sense. But that's just background, not the basis for particular fund choices. I looked and looked and looked at a million fund profiles at Morningstar, starting with those recommended here at MFO.
-Always go "no-load."
-When one particular sector is swooning, that's when to buy-in. I don't mean strange, complex, arcane derivatives. I mean, when the Western World is booming, like S & P, Dow Jones and Germany & England, more than likely, EM bonds will be drooping, so get in THEN.
-Don't try to predict tops and bottoms. You should have a long-term horizon anyhow.
-Babysit, but don't micro-manage your holdings. Watch them ride up and down. Hopefully up, overall. If you hold a fund for, let's say two years, and it has been a "dog" all along, dump it in favor of something else.
-Watch the PROPORTION of your holdings toward one another. Try not to let winners become so big that they become their own source of risk for you. If you have HALF of your stuff in a single fund, a bad day will make you sick to your stomach. But after all, if you're not going to need the money soon and you are generally satisfied with Fund X despite a one-day disaster, don't unload it just on the basis of one bad day.
These days, my biggest holding is in EM Bonds: PREMX. I won't be using the money for at least a couple of years, so I'm still reinvesting the dividends. (That's another thing. You want your money to grow? Re-invest all cap. gains and divs.)
Bonds are inherently less volatile than equities. PREMX never is down more than 3 cents or so in a day. So although it's way too big a portion of my stuff, I can live with it. You'll learn to make these kinds of judgment-calls for yourself, too.
...So, I'm told that I ought to cover these bases: Large Growth, Large Value, Mid-Growth and Value. Foreign. Domestic, safe bonds. Investment Grade FOREIGN bonds. EM bonds. you can find all sorts of categories. DO NOT attempt to cover all these bases using an approach that treats the whole investment process like baking a recipe. You'll NEVER get anywhere by covering all the bases, just in order to cover them all. In my case, here's what I've got covered;
1) Asia dividend-paying equities, bonds and convertibles through MAPIX and MACSX.
2) Asia gov't and corporate bonds through MAINX.
3) EM gov't and corporate bonds including a larger menu of countries through PREMX.
4) Domestic large-caps and bonds through MAPOX.
5) Domestic small-cap via MSCFX.
*I just recently sold PFE Pfizer for a nice profit.
For an amateur, I have become knowledgable enough to be dangerous. Know your limitations. Don't bet the farm on ANY single play. I will make a point here as I finish by specifying just ONE specific fund to stay away from: OAAAX. It carries a big front-end load, and over the last ten years, $10,000 would have today become $8,300.00. I rescued a friend's account from there and put him into TRP. I don't remember ANYONE in here ever offering a NEGATIVE recommendation, but there it is.
'Happy Motoring,' said the old Texaco Tiger...
I personally invest max. in 401k and max out also Roth IRA. There is an advantage of deciding where to draw money from in retirement. Also, you do not have required minimum distributions from Roth IRA vs Traditional IRA. I wished I started contributing to Roth earlier than I first started doing so. (Note: You can also have spousal Roth even if she is not working. You only need to cover enough *earned* income to contribute)
http://www.irs.gov/retirement/participant/article/0,,id=211358,00.html
"Spousal IRAs
If you file a joint return, you and your spouse can each make IRA contributions even if only one of you has taxable compensation. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return. It doesn’t matter which spouse earned the compensation.
If neither spouse participated in a retirement plan at work, all of your contributions will be deductible."
Not knowing your vendor choices; but I will advocate looking at Fidelity's FRIFX real estate fund; which could be a single fund holding or an addition to the real estate area.
The fund is fairly conservative with about a 50/50 mix of company(s) equity and bonds related to real estate.
You noted CGM Realty and Fidelity RealInv, among others in your original posting, but I presume these were funds you reviewed in the newspaper, and don't hold.
Our house does have a position in this fund (FRIFX).
Regards,
Catch
Personally, I have moved towards a mix of stocks and funds because I think there are smaller, long-term themes that aren't really covered by mutual funds and compelling individual stories. As for funds, I think it's important to be globally diversified and I think that's a priority (in my opinion) over being diversified in US small/large/mid cap. Things are going to to underperform - emerging markets, Europe, etc - but with that comes opportunities. Sometimes specific opportunities may be better played with an ETF, or may be better played with a broader mutual fund - there's a lot of tools in the toolkit for average investors.
Adding fixed income and alternative investments (Marketfield as well as a few others, in my case) are good ways to diversify/balance.
Looking for a small fund that has done well or a large fund that has done well is performance chasing, which often doesn't end well (Fairholme is Morningstar Mutual Fund of the Decade, then proceeds to have a horrible year, CGM Focus being the most talked about fund on the planet, then it flops for three years or so, etc etc etc.)
I don't think a small fund is necessarily better by any means, although there have been examples of small, independent funds over the years that have done well. Also, unless a fund is tactical and flexible (long-short, etc) it's not going to do well on a day like today. If it's simply a net long stock fund, it's not going to do well on a day like today whether large or small.
Additionally, as for Fairholme, I thought the Barrons article last year was concerning.
http://online.barrons.com/article/SB50001424052748703927304576637270740785508.html#articleTabs_panel_article=1